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Numerous advocacy
erhaps no social and economic issue is getting so much at-
groups, scholars, think
tention these days as the need to transition to a low-carbon
tanks and others have
economy. Most scientific evidence suggests that a 50 to 85
proposed a variety of steps
percent reduction in greenhouse gas emissions (GHG) must occur by
to address global warming
2050 to prevent global temperatures from rising more than two de-
based on a set of
grees Celsius. Toward that end, numerous advocacy groups, scholars,
assumptions about the
think tanks and others have proposed a variety of steps to take based
green economy. Yet,
on a set of assumptions about the green economy. Yet, while we need
while we need to take bold
to take bold action to address climate change, much of what passes for
action to address climate
conventional wisdom in this space is in fact either wrong or signifi-
change, much of what
cantly exaggerated.
passes for conventional
There are several key reasons why conven- If the goal is to reduce GHG by 50 per-
wisdom in this space is in tional wisdom is incorrect, or at best sig- cent by 2050, it’s not enough for each
fact either wrong or nificantly overstated. One is that because unit of economic activity to be 50 per-
the magnitude of change needed is much cent “cleaner.” Global population is
significantly exaggerated. larger than many realize, many conven- expected to grow by 46 percent (not
tional solutions simply won’t achieve the a desirable goal and one we can and
global scale needed. The simple equation should take efforts to slow). Moreover,
below demonstrates the scale of the chal- per-capita income growth is expected
lenge. Growth in global GHG emissions to increase by 129 percent (a desirable
is largely a factor of population change, goal). Put those two factors together,
per capita income change, and our “dirti- and now the planet’s economic activity
ness” of every unit of consumption. The must become 84 percent less polluting
last factor describes how much less pol- to achieve the over 50 percent reduction
luting (in terms of GHG emissions) our in GHG. That is, we need an 84 percent
business-as-usual economy needs to reduction in our “dirtiness” for every
become as the other two factors vary. unit of energy we utilize. By any mea-
sure, this is a great hurdle given the ex-
ITIF
Greenhouse Gas Change = Popula- pectations that neither population nor
tion Change * Per-Capita Income income growth are going to hold steady
Change * Dirtiness Factor over the next four decades.
A second factor limiting the discourse is the belief of Even if it were politically feasible to hike carbon prices
many that innovation is “manna from heaven” that radically, we still cannot assume it would induce chang-
either just happens or perhaps occurs if we raise the es in behavior. If higher carbon prices are really the key
price of carbon by some modest amount. But in fact, to spurring change, then more Europeans would be
innovation in general, and energy innovation in par- driving around in electric cars. Europeans (and the rest
ticular, is a quite difficult and complex process that is of us) will drive electric cars when we have better bat-
dependent on much more than modest price signals. teries (and the infrastructure that supports electric ve-
Energy innovation requires a coherent energy innova- hicles). In many European nations the price on carbon
tion policy. for transportation fuels is around $400 per ton, which
is the amount reflected in their overall transportation
Third, as we note in a forthcoming ITIF report, the cli- fuel taxes. Yet, while the high tax induces Europeans
mate change debate has to date largely been shaped by to drive smaller cars and drive less than Americans,
several dominant and competing economic doctrines it has not induced them to switch to electric cars. In
or worldviews, each with a different approach, orienta- fact, there are virtually no electric cars in Europe. The
tion, and bias toward certain policies and actions. reason is simple. Price signals only lead to behavior
change when there is a viable substitute. If beef sud-
Here are ten widespread myths about how we address denly tripled in price this summer, Americans would be
global warming and grow a green economy that de- grilling a lot more chicken. Preferences aside, there is
mand our attention. a less expensive substitute for beef – and a pretty good
one at that. This is not the case when it comes to energy
1) Higher prices on greenhouse gases are alternatives. Electric cars, for example, are still at the
enough to drive the transition to a clean prototype stage as a practical matter and priced well
economy out of reach for most consumers. Even those who can
afford these vehicles face an inadequate infrastructure
Reality: Better price signals are helpful, but not suf-
for widespread use. And as discussed below, let’s not
ficient in significantly reducing GHG.
fall into the trap of thinking that if the world achieved
The dominant policy approach to reducing GHG and
European driving habits (smaller cars and fewer miles
boosting U.S. clean energy industrial competitiveness
driven per capita) that GHG emissions would go down
focuses on establishing a price on emissions of carbon
by 2050. In fact, with the massive expected increase
dioxide and other global warming pollutants through
in automobile ownership globally, they will go up dra-
carbon taxes or cap and trade. Proponents include
matically.
economists like Greg Mankiw, Glenn Hubbard, Wil-
liam Nordhaus, scientists like Joe Romm and James
Hansen, and virtually all of the environmental com-
munity. But it is naïve to believe that these policies can If higher carbon prices are really the key to spurring change, then
succeed on their own for several reasons. more Europeans would be driving around in electric cars.
First, for many clean energy technologies to be com- Europeans (and the rest of us) will drive electric cars when we
petitive with fossil fuels, governments would have to have better batteries (and the infrastructure that supports electric
set very high prices for carbon pollution, and typically
vehicles).
governments face stiff political resistance to doing so.1
Thus, political considerations mean that any carbon
price (through tax or cap and trade) established will be Also consequential is that an economy-wide carbon
relatively low, as in currently pending U.S. climate and price would not overcome specific barriers to the adop-
energy legislation, which would establish a price aver- tion of particular technologies. While a modest carbon
aging roughly $15 per ton of CO2-equivalent for the price may help some lower-cost and more mature clean
first decade of the program (2012-2021) – the equiva- energy technologies (e.g., wind power) become more
lent of a roughly 15 cent increase in the price of a gal- competitive with fossil fuels, it will do little for less ma-
lon of gasoline.2 ture and currently more expensive technologies such as
5) “Insulation is enough” (e.g. energy Even though energy efficiency is actionable now, after
efficiency will save us)
a while, the number of retrofits will grow smaller—
Reality: Even the most optimistic estimates suggest decreasing returns to our efforts. Given current ef-
energy efficiency measures will only provide one-quar- ficiency technologies, short-term realities do not add
ter of the levels of GHG reductions that the United up. In short, 25 percent improvement in “carbon effi-
States needs to effectively address climate change. ciency” is not enough, we need 85 percent. For that we
Certainly, efforts to improve our energy efficiency are need radical innovation to provide clean energy alter-
an important part of attaining a lower carbon footprint, natives, rather than just using carbon-based fuels a bit
but in reality these are short-run, stop-gap solutions. more efficiently. Moreover, we need to recognize that
Those who unabashedly support energy efficiency increases in efficiency also have offsetting effects. As
measures, like professor Robert Ayers, journalist Lisa organizations and households save money on energy
Margonelli, and the American Council for an Energy- because of efficiency, demand falls as prices for energy
Efficient Economy don’t necessarily see this. also fall (or at least don’t rise as fast as they would with-
out efficiency-induced demand reduction). As a result,
To be sure, efficiency helps. Yet, if we add all of the po- lower relative prices for energy mean that people con-
tential savings from energy efficiency, they don’t make sume additional energy, at least partially offsetting the
a big enough dent in achieving the necessary reduc- original energy savings from efficiency.
tion in GHG emissions. As a recent McKinsey Quarterly
report indicated, improvements to energy efficiency
do reduce our demand for power and present the low- 6) Low growth is the answer…just live
simply
est cost of abating up to one-quarter of GHG needed
to meet the target of 50 percent global reduction by Reality: Neither living simply nor a massive reces-
2050.11 These efficiency-enhancing measures come sion will enable us to obtain the level of reductions
mainly from the building and transportation sectors required.
and include weatherizing homes with better insula- Given that GHG emissions are a function of the mul-
tion, retrofitting buildings or utilizing LEED “green tiplication of population, per-capita income, and “car-
building” standards, and increasing fuel efficiency of bon dirtiness,” some environmental advocates have
vehicles. placed their focus on reducing the second factor (per-
capita income). Rooted in the philosophy of Thomas
While these kinds of activities do help much of this Malthus, of “dismal science” fame, they warn that
market, the “low hanging fruit,” or as Secretary Chu prosperity (or as they call it “wasteful consumption”)
likes to say the “fruit on the ground,” is difficult to co- is the real culprit. Only with less growth and simpler
ordinate and stimulate. Residential weatherization and lifestyles can we address climate change.
solar retrofitting is more like gathering potatoes under
the ground for very little overall reduction in GHG. These modern day Malthusians believe in “socially
Improved industrial efficiency may be a better target sustainable economic degrowth”. Herman Daly, an
given that the manufacturing industry is responsible ecological economist at the University of Maryland,
for approximately one-third of GHG emissions, with leads the way with his “steady state economy” idea, in
the lion’s share coming from energy-intensive sectors which our goal would be to respect the limits of the
1. Michael Shellenberger et al., “Fast, Clean, & Cheap: Cutting Global Warming’s Gordian Knot”, Harvard Law & Policy Review,
2 (1) (2008).
2. A number of independent estimates have projected that the carbon price established under the American Clean Energy
and Security Act (ACESA) would remain around $15/ton until as late as 2020. See: Larry Parker and Brent Yacobucci,
“Climate Change: Costs and Benefits of the Cap-and-Trade Provisions of H.R. 2454.” Congressional Research Service.
September 14, 2009.
3. Shellenberger et al., “Fast, Clean, & Cheap: Cutting Global Warming’s Gordian Knot”.
4. David Victor and Danny Cullenward. “Making Carbon Markets Work,” Scientific American, September 24, (2007). See also:
Nicholas Stern, The Stern Review: The Economics of Climate Change, (Cambridge: Cambridge University Press, 2007), 308.
5. “EPA Sets Thresholds for Greenhouse Gas Permitting Requirements/Small Businesses and Farms Will be Shielded,”
United States Environmental Protection Agency, May 13, 2010.
6. Based on authors’ calculations. Total U.S. CO2 emissions equaled 5,833 million tons in 2008, or 19 percent of global
emissions. According to John Hawksworth, “The World in 2050: Implications of global growth for carbon emissions and
climate change policy,” Pricewaterhousecoopers, 2006,
http://www.pwc.com/en_GX/gx/world-2050/pdf/world2050carbon.pdf, by 2050 global CO2 emissions will increase by
112 percent, and the United States will account for 15 percent of global emissions. Using the 2008 figure, an 85 percent
reduction in U.S. emissions would only reduce global CO2 by 12 percent.
7. Paul Krugman, “Building a Green Economy,” The New York Times, April 5, 2010,
http://www.nytimes.com/2010/04/11/magazine/11Economy-t.html.
8. Yael Borofsky, “The Breakthrough Institute: Jon Stewart Challenges Al Gore On Climate Technology Challenge,”
Breakthrough Blog, November 6, 2009, http://thebreakthrough.org/blog/2009/11/daily_show_stewart_skeptical_o.shtml.
9. Nate Lewis, “Is Cap and Trade Enough? Why Reducing Emissions Depends on Technology Innovation,” Presentation,
June 10, 2009, http://itif.org/events/cap-and-trade-enough-why-reducing-emissions-depends-technology-innovation.
10. Tucker Ruberti, “Bringing Utility-Scale Solar Power to the Grid | Renewable Energy World,” RenewableEnergyWorld.com,
April 28, 2010, http://www.renewableenergyworld.com/rea/news/article/2010/04/bringing-utility-scale-solar-power-to-
the-grid?cmpid=WNL-Friday-April30-2010.
11. Per-Anders Enkvist, Tomas Nauclé, and Jerker Rosander, A cost curve for greenhouse gas reduction. The McKinsey
Quarterly 1 (2007): 35-45.
12. Herman Daly, “Herman Daly: Towards A Steady-State Economy,” The Oil Drum, May 5, 2008,
http://www.theoildrum.com/node/3941.and Herman E. Daly, “Climate Policy: From “know how” to “do now””
(presented at the American Meteorological Society, Washington, D.C., November 13, 2007),
http://www.climatepolicy.org/?p=65.
13. Juliet B. Schor, “The Triple Imperative: Global Ecology, Poverty and Worktime Reduction,” Berkeley Journal of Sociology 45
(2001): 2-17.
14. Calculations are based on the World Bank’s World Development Indicators, using Gross National Income (GNI) per
capita, expressed in purchasing power parity dollars to adjust for price level differences across countries, not adjusted for
inflation. Global GNI for 2008 was $69.773 trillion (6.7 billion multiplied by $10,414 global average). To maintain a steady
state, global GNI would remain the same, so dividing $69.773 trillion by 9 billion in population, would result in $7,752 per
capita.
15. Thanks to Ted Nordhaus of the Breakthrough Institute for this analysis.
17. Peter Huber and Mark Mills, “Dig More Coal—The PCs are Coming,” Forbes, May 31,1999,
http://www.forbes.com/forbes/1999/0531/6311070a.hrml.
18. Wendell Cox, “Improving Quality of Life Through Telecommuting,” The Information Technology and Innovation
Foundation, January 2009.
19. Robert D. Atkinson, Daniel D. Castro, “Digital Quality of Life: Understanding the Personal & Social Benefits of the
Information Technology Revolution”; Stephen Ezell, “Explaining International IT Application Leadership: Intelligent
Transportation Systems,” The Information Technology and Innovation Foundation, 2009.
20. John A. Laitner and Karen Ehrhardt-Martinez, “Information and Communication Technologies: The Power of
Productivity,” (Washington, D.C.: American Council for an Energy-Efficient Economy, February 2008),
http://aceee.org/pubs/e081.htm, accessed August 5, 2008.
21. Global e-Sustainability Initiative (GeSI), “SMART 2020: Enabling the Low Carbon Economy in the Information Age,”
press release, London, June 20, 2008,
http://www.gesi.org/index.php?article_id=210&clang=0.
22. John A. Laitner and Karen Ehrhardt-Martinez, “Information and Communication Technologies: The Power of
Productivity”.
23. Christopher Steiner, “Go Green And Stay In The Black - Forbes.com,” n.d.,
http://www.forbes.com/2010/03/08/green-small-business-entrepreneurs-technology-small-biz-toolkit-green-tips.html.
24. Michael E. Porter, The Competitive Advantage of Nations (New York: Free Press, 1990).
25. U.S. Congress, Office of Technology Assessment, Industry, Technology, and the Environment: Competitive Challenges and Business
Opportunities (Washington, D.C.: U.S. Government Printing Office, January 1994).
26. Ken Zweibel, “The Arithmetic of Solar Royalty Trusts,” The Solar Review, April 21, 2010, http://thesolarreview.org/.
27. Robert Atkinson et al., “Rising Tigers, Sleeping Giant: Asian Nations Set to Dominate the Clean Energy Race by Out-
Investing the United States,” The Breakthrough Institute and The Information Technology and Innovation Foundation,
2009, http://www.itif.org/dev/publications/rising-tigers-sleeping-giant-asian-nations-set-dominate-clean-energy-race-out-
investing.
28. Robert Atkinson, “Clean Technology Manufacturing Competitiveness: The Role of Tax Incentives,” 2010,
http://finance.senate.gov/imo/media/doc/052010RAtest.pdf.
29. Robert Atkinson and Scott Andes, “The Atlantic Century: Benchmarking EU and U.S. Innovation and Competitiveness,”
The Information Technology and Innovation Foundation, 2009,
http://www.itif.org/publications/atlantic-century-benchmarking-eu-and-us-innovation-and-competitiveness.
30. Atkinson et al., “Rising Tigers, Sleeping Giant: Asian Nations Set to Dominate The Clean Energy Race by Out-Investing
the United States”.
31. “Resolved: The U.S. Can and Should Pick Winners,” Debate at The Information Technology and Innovation Foundation,
April 2010, http://www.itif.org/events/resolved-us-can-and-should-pick-winners.
32. Thomas Howell et al., “China’s Promotion of the Renewable Electric Power Equipment Industry,” Dewey and LeBoeuf
LLP for the National Foreign Trade Council, March 15, 2010,
http://www.nftc.org/newsflash/newsflash.asp?Mode=View&id=236&articleid=3015&category=All.
33. Erica R. Fuchs and Randolph Kirchain, “Design for Location: The Impact of Manufacturing Offshore on Technology
Competitiveness in the Optoelectronics Industry,” Management Science, R&R, June 2, 2009 (2010),
http://ssrn.com/paper=1545027.
Dr. Robert D. Atkinson is President of the Information Technology and Innovation Foundation, a Washington, DC-based
technology policy think tank. He is also author of The Past and Future of America’s Economy: Long Waves of Innovation
that Power Cycles of Growth (Edward Elgar, 2005).
Dr. Darrene Hackler is a Senior Fellow at the Information Technology and Innovation Foundation. She is the author of
Cities in the Technology Economy (ME Sharpe 2006). She was an associate professor at George Mason University in
the Department of Public and International Affairs where her research focused on the political economy of innovation,
entrepreneurship, the technology industry, and telecommunications infrastructure.
Acknowledgements
The authors thank Steve Norton and Scott Andes for editorial and research assistance efforts. In addition, thanks to
Emiko Guthe for production assistance.
ITIF, founded in 2006, is dedicated to conceiving and promoting the new ways of thinking about technology-driven
productivity, competitiveness, and globalization that the 21st century demands. Innovation goes far beyond the latest
electronic gadget in your pocket – although these incredible devices are emblematic of innovation and life-changing
technology. Innovation is about the development and widespread incorporation of new technologies in a wide array of
activities. Innovation is also about a mindset that recognizes that information is today’s most important capital and that
developing new processes for capturing and sharing information are as central to the future as the steam engine and
trans-Atlantic cable were for previous eras. This is an exciting time in human history. The future used to be something
people had time to think about. Now it shows up every time we go online.
At ITIF, we believe innovation and information technology are at the heart of our capacity to tackle the world’s biggest
challenges, from climate change to health care to creating more widespread economic opportunity. We are confident
innovation and information technology offer the pathway to a more prosperous and secure tomorrow for all citizens of
the planet. We are committed to advancing policies that enhance our collectivecapacity to shape the future we want -
beginning today.
ITIF publishes policy reports, holds forums and policy debates, advises elected officials and their staff, and is an active
resource for the media. It develops new and creative policy proposals to advance innovation, analyzes existing policy is-
sues through the lens of advancing innovation and productivity, and opposes policies that hinder digital transformation
and innovation.